China has frozen the distribution of infrastructure loans to Kenya. This comes as a result of China’s Exim Bank citing displeasure of Kenya seeking to extend debt relief from June to December 2021. Kenya’s intention for an extension for relief was revealed by the International Monetary Fund (IMF).

In January 2021, it was agreed that Kenya would adhere to a 6-month debt relief period allowed by China and other G20 nations. This was approved and signed under the Debt Service Suspension Initiative (DSSI).

The initiative means that bilateral official creditors are, during a limited period, suspending debt service payments from lower-middle-income countries that put in a request.

Kenyan President Uhuru Kenyatta (Left) and Chinese President Xi Jinping prior to a bilateral meeting in Beijing, China in 2018.

PSCU

Forged in December 2020, the plan is meant to cushion nations whose top priority would be to focus resources in combating the ongoing health pandemic. The framework's purpose is to safeguard livelihoods of the world’s most vulnerable persons.

Kenya qualified for this privilege after the government illustrated diminishing effects of the current pandemic on collection of revenue.

Funds made available to local contractors were suddenly halted when Kenya sought to extend the above-stated debt period. As a consequence, Chinese-funded projects in Kenya face a possible lack of liquidity. 

According to Business Daily, remissions made in the direct payment method to contractors working on Chinese projects have been stalled since last month. This method has forced Kenyan companies relying on Chinese loans to send notices for supplier payments to Chinese banks through the National Treasury.

The wealthy countries owning this infrastructural debt are Belgium, Canada, Denmark, France, Germany, Italy, Japan, Republic of Korea, Spain, and the USA. The DSSI (Debt Service Suspension Initiative) amended the payment period of Ksh 32.9B in principal and interest to be due between January and June. This loan is supposed to be serviced in the next four years with a one-year grace period.

Nonetheless, China is the biggest owner of this loan which was paid out by national banks: China Development Bank and Exim Bank of China. The communist republic has therefore taken to reviewing its terms with Kenya exclusively but following requirements of the Paris Club of international creditors.

However, Treasury CS Ukur Yatani and other Treasury officials have denied any slow-down in receiving and distributing loan monies from China. They asserted that the country had received affirmative responses from states where they sought an extension of the debt repayment relief.

Treasury CS Ukur Yatani presented the 2021/2022 budget on Thursday, June 10, 2021  BY Ian Mulei, Kenyans.co.ke

FILE